With home values ​​falling in recent years, some homeowners who need to sell in today’s market find themselves stuck owing more than their home is worth. In this situation, short selling may become a viable option.

What is a short sale:

A short sale is simply a sale in which the proceeds are not sufficient to cover all outstanding obligations associated with the sale of the home, including the mortgage(s), unpaid property taxes, attorney fees, title expenses, commissions etc This shortage would require the seller to bring money to closing or negotiate a “short” payment with their lender. The lender is not required to agree to this, but many will. In most cases, sellers who are facing foreclosure or have fallen behind and no longer have the ability to continue making their payments attempt a short sale.

The process:

There are many misconceptions about the short sale process and the lender’s role in it, even among some real estate agents. The role of the seller’s lender is nothing more than that of a contingency. This can vary by state, depending on whether it is a title theory state or a link theory state. This information applies to Illinois, which is a lien theory state (the owner has the title and the lender has a lien on the property)

The seller owns the home and is ultimately the one who, with the help of their agent, accepts, rejects or proposes a counter offer once the offer is received. When the seller accepts the offer, it is contingent on the lender accepting the net proceeds of the sale as full settlement of amounts owed. On more than one occasion, an agent working for a buyer asks when their offer will be sent to the bank, even before the seller agrees to accept it. May add to confusion if multiple offers are received. Some think that all offers must be submitted to the lender. This is not exact. All offers must be submitted to the seller, not the lender. The goal of the listing agent should be to obtain the best possible offer, thereby giving the transaction the best possible chance of actually closing.

What are the odds of a successful closing?

They are actually better than they used to be. Today, it makes sense for banks to seriously consider accepting a short sale since, in many cases, they get more money overall rather than going through the entire foreclosure process, repossessing the house, and marketing it REO. Estate). Illinois is a judicial foreclosure state. Some states are not judicial. Judicial foreclosures take much longer to complete. In Illinois, the process can take a year or more. There are some states that take more than 3 years. When you consider that, in most cases, the bank receives nothing while the process drags on, you begin to see your motivation to consider other options. Add to this the deterioration of the property during that time and the additional maintenance costs, and the benefits to the bank become even clearer. The bank in this situation, just like the homeowner, is looking for the best way to limit their losses.

The benefits of a short sale:

Lenders generally do not allow the seller to receive any of the proceeds from the sale. This is fair considering that the entire basis of the short sale is negotiating with the lender to take less than what is owed. The only exception I’ve seen to this was years ago when, due to an error, we were out of balance by $.06. The title company actually handed the seller a check for six cents! As a seller in this situation, one must keep in mind that if the lender accepts the short sale, they are allowing the seller to avoid having a foreclosure on their record that will follow them for many years. Additionally, most short sales also allow the seller to get out from under debt without being dogged by a deficiency. These two things should be all the motivation you need. There are no guarantees of success, but it is certainly worth the effort.

Who should you call?

These transactions are not for beginners. There is no substitute for experience when it comes to navigating through this process. An experienced agent and attorney are crucial. In this situation it makes sense to ask a lot of questions. Specialized short sale/foreclosure courses are available for agents. Some are very valuable, but these courses alone do not necessarily make an agent an expert. A seller-recommended agent who has been through this process is definitely someone worth talking to.

What will it cost?

In most cases, it won’t cost you anything unless the agent charges you an up-front fee to list the house. All agents negotiate their own fees. It shouldn’t cost you anything to talk to an agent and get information. All commissions and other closing costs that a seller would normally pay will be taken into account and if the lender accepts the short sale, they accept the net amount of the sale, so essentially the lender pays the closing costs. closing. For someone facing foreclosure, a short sale can be a great solution.